How much should labels be paying?

How much should labels be paying artists for downloads? It’s been debated almost since day one of the digital music era. When a CD is sold, contracts typically provide that artists receive a royalty—often 10%-14% of the retail price of a “record,” after packaging deductions. A license—frequently applied when music is used in films or commercials—dictates a share, often 50%, of what the label receives.

It’s easy to understand why recording artists would prefer to be compensated for digital downloads under a licensing scenario. Label executives have said in the past that record companies could not financially survive if half of all download money went to artists; they were not set up to be joint ventures with artists.

The matter gets into some grey areas of copyright law. If this suit goes to trial, a court will decide whether granting permission to sell downloads should be considered a label selling a copy (a sale), or a label granting a right for someone else to sell a copy (a license).